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If Reform Fails

Summary: Some optimistic liberals have begun to suggest that if conservatives manage to block the Affordable Care Act (ACA) , this could open the door to better reform legislation.

Why that won’t happen.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

If conservatives manage to kill health care reform legislation, what will happen next?

I really don’t want to go there.

First, I’m convinced that conservatives won’t be able to repeal the Affordable Care Act (ACA). Democrats will hold onto the Senate, and President Obama still has a veto. If necessary, he will use it to protect the bill. Meanwhile, the majority of the public either favors the legislation or want to “wait and see” how well it works. Most voters would be utterly disgusted if Congress returns to the health care debate this fall. It was ugly the first time around; virtually no one wants to watch re-runs on C-Span. In the months ahead, Americans hope that their elected representatives will do just three things: create jobs, create jobs, and create jobs.

Secondly, if conservatives somehow succeed in crippling the reform bill, we will find ourselves back in a world of laissez-faire health care where medical spending continues to spiral by 4.5% to 9% a year (just as it has for the past ten years), thanks to a combination of climbing prices and rising utilization.

Here, I’m not talking about how much insurance premiums rose: reimbursements that private insurers, Medicare and Medicaid paid out to hospitals, doctors and patients over the past ten years have been climbing by 4.5% to over 9% annually.

In some years, Medicare reimbursements were growing faster; in other years, payouts by private insurers levitated. Over the same span, Kaiser reports that premiums for a family plan rose by an average of 13.1% a year.

Without the Affordable Care Act (ACA), payouts for drugs, devices, hospital services and physicians’ services are expected to accelerate over the next ten years, rising by an average of more than 6% a year. Without reform, roughly one-third of our health care dollars will still be squandered on unnecessary treatments, redundant tests, over-priced products, preventable hospitalizations and avoidable medical errors. Employers will continue to shift costs to employees (or just get out of the health benefits business altogether), and more and more Americans will find themselves priced out of the health care market.

Rather than joining the rest of the developed world by offering affordable, comprehensive care to all of our citizens, the U.S. will find itself becoming part of the “developing world”–where only the very wealthy have access to good care.

I don’t believe that will happen. We are on the path to reform. It will be a long, rocky road, but there is no turning back. The alternative is just too bleak.

The Liberal Dream

That said, why am I even addressing the possibility that conservatives will form a death panel and pull the plug on the ACA?

Because some irrepressibly optimistic progressives have begun to suggest that if reform’s opponents prevail, the story might have a happy ending. And I am worried that these liberals may encourage other progressives to step back, and let conservatives have their way. After all, many on the Left found the Affordable Care Act disappointing—a half measure, not what they hoped Obama would deliver. Some are willing to let it slip away.

Just a few days ago, in a piece in AolNews titled “Obamacare Critics: Be Careful What You Wish For,” New American Foundation fellow Micah Weinberg made the argument that a victory for the conservatives could lead us to what some liberals still yearn for: a single-payer system.

“If this round of reform fails . . . . we'll have to do something entirely different. But don't hold your breath waiting for a system that relies even more heavily on the private market for health insurance.

“In fact, the most likely thing that we will do is move toward a system like Medicare that is financed by the government.“It turns out that Medicare is extremely popular among seniors of all political persuasions, even tea partying ones. After all, the thing the town hall screamers were the most upset about was the idea that the program would be changed to institute ‘death panels.’ This was a vicious smear that could not have been further from the truth. But it shows just how little appetite there is for changing the Medicare program in any way, even among members of the conservative right.

“So people of all political stripes love to love Medicare, and they love to hate insurance companies. It stands to reason, therefore, that if we have to start over, we'll build on what is popular rather than heading even further in an unpopular direction.

“Conservative Republicans are free to continue their quest to undermine health care reform. But they should be careful what they wish for, because through their actions they may be the very people who finally lead this country to . . . a single-payer health care system.”

Employer-Based Insurance vs. Medicare

What Weinberg forgets is that while seniors love Medicare, a great many Americans under 65 love—or at least like—their employer-based insurance, if for only one reason: their employer pays for it.

And when employers pick up most of the tab, this is good news for all taxpayers. When middle-class and low-income employees working at large companies have good insurance, we don’t have to worry about funding subsidies to help them buy coverage. (Granted, wages are lower because employers provide benefits—in that sense the employee pays for his health insurance. But as I explain below, if single-payer replaced employer-based insurance, salaries would not automatically rise to equal the value of the lost perks.)

Typically, employers pay 85% of health insurance premiums according to the Kaiser Family Foundation. In addition, as this Kaiser Issue Brief points out, the average large-employer PPO plan is more generous than Medicare.

Even when you include Medicare’s relatively new prescription drug benefit, Kaiser observes, the average value of Medicare benefits in 2007 ($10,610) lagged the value of the typical plan offered by a large employer ($12, 160). “Medicare is less generous, on average, than the comparison employer plans because it has higher cost-sharing for inpatient care under Part A (particularly for relatively short hospital stays), no out-of-pocket limit on services provided under Part B, and less generous drug coverage under the standard Part D benefits. . . .”

In 2010, for example, if a Medicare patient is hospitalized he must meet a deductible of $1,100 before Medicare kicks in to pay for the first 60 days of hospitalization. If he remains in the hospital longer than 60 days, the patient faces a co-pay of $275 per day—up into day 90—and $550 per day for days 91 through 150. After 150 days, the patient is responsible for all hospital charges, and there is no cap on how much he will be asked to pay, out of pocket, in a given year. Medicare part B covers physicians’ services, but seniors must pay premiums of $110.50 to $353.60 per month (depending on income), and Medicare pays only 80% of the approved costs for these services.

As Kaiser explains: “individual Medicare also pays a smaller share of total costs associated with covered benefits, on average, than either the typical large employer PPO or the Federal Employee Health Benefit Plan’s standard option). In 2007, Medicare paid 74 percent of costs associated with covered benefits for an individual with average health care costs ($14,270), while the typical large employer PPO paid 85 percent of total costs.

Indeed, when they turn 65, many Americans are surprised to discover that Medicare doesn’t reimburse for everything their employer-based insurance covered—routine eye exams, for example, are no
t included in the package. Many seniors are even more startled by co-pays and deductibles that can be hefty, particularly if they’re hospitalized.

To compare job-based insurance to Medicare, think of it this way: 60 percent of seniors lay out as much as $279 a month to pay for supplemental coverage such as MediGap in order to fill the cracks in Medicare. That’s $3,448 a year—just to bring Medicare up to the level of a good employer plan.

Make no mistake: I’m not suggesting that seniors don’t like Medicare; They do. At least the 60% who have supplemental coverage (because either they or their former employer can afford it) are pretty content.

But younger Americans who are lucky enough to work for a large company where they have employer-based insurance are fond of their coverage, too. They won’t want to give it up–especially if someone explains that insurance modeled on traditional Medicare would cover less, while costing them more.

Before Dreaming of Single-Payer . . .

If a single-payer plan set out to match the benefits that large employers now offer, it would cost taxpayers a bundle.

Granted, thanks to lower administrative costs, a public plan’s premiums should be at least 5 percent to 7 percent lower than premiums for a comparable private plan. (These numbers come from a Commonwealth Fund brief that offers a very positive assessment of how much a public plan could save..) When compared to a “public option,” that competes with private insurance, a single payer plan should yield even greater savings because hospital and doctors would be dealing with only one payer, slashing their paperwork and administrative costs.

But, over time, those administrative savings wouldn’t be enough to pay for the generous benefits that large companies offer. Don’t forget that the price of the services and products that hospitals, doctors, drug makers and device makers provide has been climbing by an average of nearly 5% to 11% a year, year after year, for two decades. The one-time savings in administrative costs (however big it is), won’t compensate for continuous, compounded increases in the underlying cost of medical products and services.

The only way that a single payer system could afford the level of coverage that large employers offer is if we rein in runaway health care inflation by wringing some of the waste out of our system. And, assuming that we’re going to eliminate waste in an intelligent way, using a scalpel, not a meat cleaver, this will take time. The Affordable Care Act set out to change how we reimburse for care by moving away from fee-for-service, paying health care providers for value (better outcomes at a lower price), not volume. This means persuading patients—and physicians—that more care is not necessarily better care.

Financial carrots and sticks also can encourage hospitals to take a closer look at the medical errors that, according to a recent study conducted by Millman, Inc. for the Society of Actuaries (SOA), added $19.5 billion to the nation's health care bill in 2008. Not all errors are preventable, but many are. The most expensive error on the SOA list—pressure ulcers (a.k.a. bedsores) often can be avoided. Yet in 2008 374,964 ulcers, at a cost of $10,288 each, boosted the nation’s health care tab by $3.858 billion. (See the Institute for Health Care Improvement on prevention programs that have dramatically reduced the incidence of pressure ulcers in a number of hospitals.)

Who Would Make Up for the $$$ Employers Now Pour Into Health care?

Keep in mind that if we switched to a single-payer system, large companies would no longer pay 85% of their employee’s premium. Low-income and middle income families who now have job-based insurance would qualify for subsidies, but taxpayers would have to foot the bill. More affluent employees (individual earning over $43, 320 or a family of four taking home more than $88,200)–would not receive a government subsidy.

As noted, single-payer insurance would enjoy lower administrative costs, but even so, next year, comprehensive f amily coverage that is comparable to what large employers now offer would cost more than $10,000 (By then, a private plan that offers good coverage for a family will fetch close to $14,000)

But wait—if employers no longer provided benefits, wouldn’t Congress insist that they raise wages-, or pay higher taxes into an insurance pool to help fund the cost of universal coverage? Yes, but it’s doubtful that either wage hikes or taxes would equal what employers now lay out for insurance.

First, what an employer now spends on premiums is tax deductible as a business expense. The value of that tax deduction varies, but let’s say that a company contributes $9,000 to each employee’s insurance premiums (this was the average contribution in 2007), and that, after taking the deduction, insurance costs the company $9,000 minus “X” (with X equaling the value of the tax write-off) per employee.)

If single-payer replaced employer-based insurance, would most employers be willing or able to raise each employee’s wages by $9,000—or contribute $9,000 to the pool? Probably not. Employers would argue, not unreasonably, that in the past they were spending only $9,000 minus X, and they were hard-pressed to do that. They cannot afford more.

Secondly, when an employer invests in his own employees’ insurance, he buys something that is of value to his business: employee loyalty. His workers are less likely to move to a competitor if he offers generous insurance. This saves him the time and money that it takes to train new workers. Turnover is expensive. Under a single-payer system, if a business pays taxes into a national insurance pool, it gets nothing in return. This is another reason why employers would be reluctant to toss even “$9,000 minus X” into a pool that would fund universal coverage. Many in Congress would sympathize with their reasoning.

As for raising wages –if the 1990s taught us anything about labor economics, it is that employers will not hike salaries for most workers unless they absolutely must. Even while earnings grew and productivity rose, in the 1990s the average worker did not see his wages climb. Corporations paid out dividends to shareholders, bought other companies, invested in their own business, bought back their stock and hiked executive salaries. They did everything—except share higher profits with workers—until the final years of the decade. Even then, workers’ wages did not begin to catch up with the gains corporations and their investors enjoyed.

Today, with real unemployment well over 10 percent, businesses are not worried about losing workers. In the past two years, when companies such as GM or Dow Jones cut back on
insurance benefits, they did not hand out raises.

Under a single-payer system, I am sure Congress would expect businesses to make a contribution to the pool that funds government subsidies, but you can be quite certain that employers would not wind up paying 85% of the cost of coverage—not even 85% of the cost for the 133 million employees that large companies now insure.

Who will pick up the difference? Tax-payers and more affluent Americans who don’t qualify for government subsidies.

Why Medicare E (for Everyone) Just Isn’t Affordable Now

Do we want to try to drop the entire U.S. population into a single-payer system that resembles Medicare sometime over the next few years? No. Keep in mind that our entire health care system is broken. Medicare, like other payers, squanders roughly one-third of its dollars on treatments and products that provide little or no benefit to the patient. Our for-profit medical-industrial complex is set up to maximize the amount we spend on drugs, hospitals, tests and procedures. If we attempted to roll out a single-payer plan next year, the only way we could afford to cover everyone is if took an axe to the waste, rationing care, slashing physicians’ fees and closing hospitals. This is not rational reform.

As it stands, we’re planning on shepherding some 32 million uninsured Americans into what we euphemistically call our health care “system” in 2014. This is because we have no choice. Those Americans have been left out in the cold for too long. They need our help. And we have to start somewhere.

The good news is that the cost of covering the uninsured, along with the climbing cost of Medicare, will push policy-makers to start demanding value for our health care dollars. Already, Medicare has begun insisting on higher quality, lower cost, patient-centered care (refusing to pay for preventable hospital readmissions, for instance.)

Medicare director Don Berwick will be setting an example that private insurers will follow. As president of the Institute for Health Care Improvement (IHI), Berwick has had great success in showing hospitals, doctors and nurses that they can make their own work environment more efficient, and their work more satisfying if they collaborate to provide better, safer care at a lower cost. Reform shouldn’t have to be imposed on caregivers. It can happen from the inside. Berwick understands this better than anyone. Between now and 2014, we can prepare for reform, but it will take more than three years to make the deep structural changes needed.

If Liberals Want a Public Option, They Should Protect Reform Legislation

Congress is not going to pass a single-payer bill at this point in time. For one, legislators know that the vast majority of the 133 million employees who work at large companies where their employer pays 85% of premiums are quite attached to that perk. Why wouldn’t they want to hold onto it? On average, benefits are better than Medicare’s, and cost sharing is lower.

Why should the rest of us care whether those 133 million hang on to a sweet deal? Because society as a whole benefits as long as those corporations continue funding 85% of the cost of insurance for their workers–including millions of middle-income and low-income Americans. (Under the rules of employer-based insurance, all employees must receive the same deal.) And according to a Kaiser survey, despite the economic downturn, employers remain surprisingly committed to providing benefits: 95 percent of those with 50 or more employees offer insurance. Although they are increasing co-pays, only 2% say they are very likely to drop benefits. This gives us some breathing room, time to bring down health care inflation, before Americans decide whether they want a single plan for everyone.

Make no mistake: I’m not disparaging the liberal dream. I’m just saying that it won’t happen in the next few years.

First, we need to realign the financial incentives in our health care system .The reform legislation lays out the blueprint for providing higher quality, more affordable care, but reform will be a process that takes place over time.

As I have suggested in the past, my guess is that sometime before 2014 a public option will be added to the current reform scheme. Under the new regulations, some for-profit insurers are bound to throw in the towel, and I suspect that we will need a public plan to take up the slack in the Exchanges. Ultimately, I expect that a public plan will be open to everyone. When reform legislation included that option beginning in 2014, legislators suggested that employees of large companies would be eligible to join a few years later. If a public plan manages to provide high quality coverage at a reasonable price, more and more families will pick the government plan.

This is the best route to a public health care : let Americans choose it.

But all of this will happen only if we press ahead with reform. Liberals must put their heads down, get behind the Affordable Care Act, and push—as hard as they can.

The alternative is not the status quo—it is something far worse. The situation is deteriorating as I write. Our health care system is heading for a wall. Without reform, even Medicare will run out of money, and you and I will just have to hope against hope that we and our loved ones don’t get sick.

If the Republicans take control of the the House and the Senate in November, they won’t actually repeal the ACA, they’ll just defund it, thereby achieving their objective without having to vote on repeal.

With regard to employer based coverage offering “more bang for the buck” because employers can deduct the cost of premiums as a business expense, you forget that there are many employers who cannot do this. Consider government entities at all levels, most educational institutions, churches and other non-profit organizations. They do not benefit from the tax break and bear the full employer share of health insurance costs. Those costs are a huge burden on these employers, especially the smaller ones, and they could benefit from being part of a larger pool that a public plan would offer.

Maggie, Sara and Caspian–
Maggie–
Youmake a good point abbout non-profits. ( I work for a relatively small non-profit and am keenly aware of how much health insurance costs them.)
Of course, in some senes it is perverse to complain that they dodn’t benefit from a tax break when they pay no taxes!
As we all know, some non-profits deserve their tax break–their contributions to society more than equal the lost taxes. Others, however, sit on very valuable property, accumulate enormous endowments, pay their top executivs enormous salaries, accumulate great wealth, and their contributions to society don’t begin to equal the lost taxes–which we all must make up for.
That said, ideally, smaller non-profits would be able to join the Exchanges where they could get much better rates by becoming part of a larger group.
In addition–and this is important– the govt’ will pay 25% of the premiums that a small non-profit pays toward insurance as long as average wages at the non-profit are less than $60,000. In a couple of years, that goes up to 35%.
Sara–
If you look at analysis by people who call elections and count votes, the consensus is that the Republicans will take the House, but not the Senate.
In additiion,much of the legislation is already funded, with funding coming from different sources. Defunding it would be extremely complicatedm abd most Americans don’t wont Congress spending m
ore time on healthcare.
PlusPresident Obama ahs a veto which he would use to block “defunding.” Finally, no one thinks Republicans will have the votes to overcome a veto.
At most, they might be able to create gridlock–so that nothing gets done. If that happens the American people will vote them all out of office next time around.
Caspian– Don’t know what you mean by “realistic immplementation” of ACA. There are 162 provision relating to Medicare in ACA, many of them designed to save money and rein in inflation. Have you read those 162 provisions?
Presumably not. You have others things to do–a job, family . .
But it is my job to read and analyze the legislation. I’m now writing a paper about how much Medicare can save.
With approximately 1/3 of Medicare dollars wasted on unnecessary, ineffective and overpriced goods and services, there is plenty of money to save.
Some conservatives argue that Congress will never approve the savings: after all, one man’s waste is another man’s revenue stream.
But under this legislation, Medicare can launch a pilot project (using financial sticks to reduce medical errors in hospitals, for instance, by refusing to pay for truly avoidable errors) and if the pilot works (errors fall) Medicare can then roll out that pilot project nationwide, Without Going Through Congress.
This is a Huge Change. Berwick knows how to lift quality and save the money; IHI has done many projects with healthcare providers that led to safer, better-co-ordinated care at a lower cost.
In addition, under the law, Medicare can begin to pare physician’s fees–very carefully, cutting fees for certain services where it is now overpaying. Growth in payments to physicians would not be allowed to outstrip normal inflation. If Congress objects to the cuts, Congress has a very limited amount of time to come up with cuts that will yield equal savings without reducing benefits or the quality of care under Medicare.
So Medicare is going to be protected from lobbyists and politicians in a way that it never has been before.
This is HUGE –and this is why it is realistic to assume that ACA will be able to implement provisions that save money while improving care.

Maggie,
I believe this recession we are in now is mainly caused by good union type manufacturing jobs leaving the country over the last 25 years. Now that it has reached an acute level, blue collar types are in a hopeless position which is not going to get better until good manufacturing jobs return because we cannot all be doctors and lawyers.
Now the question is, did the cost of employer provided healthcare help force many of these former US manufacturing jobs to leave for countries with less costly (to employers) health costs?

ng–
Jobs have left the U.S. because the cost of living here is so much higher than it is in China, India, and many other developing countries.
In those countries, companies can pay their workers far less –say $20 a day (or less) and the worker and his family can survive. Indeed, in China many workers are doing more than surviving. They have become middle-class– they can afford to buy refrigerators, other home applicances, motorcycles (if not a car) etc.
Meanwhile–and this is key–workers in many developing countries have learned to make products that are just as good as products made in the U.S.–for far less.
Take a look at furniture made in China–and clothing. Often it is very well made.
And when it comes to computers, software and other electronics, these countries have made great advances. People in China are now buying computers made in China rather than computers made in the U.S.
Also, many service jobs have been exported. As you no doubt know, when you call customer service as your bank, you may well wind up speaking to someone in India. Because prices are so much lower their, these workers can afford to work for much less than they could if they lived in the U.S.
Bottom line: even if employers didn’t pay for health benefits, wages in the U.S. make our products much more expensive than equally good products made abroad.
The irony is that while U.S. workeres have lost jobs, low-income and middle-income workers benefit from the relatively cheap imports sold at places like Walmart. Many products are much less expensive thean they would be if manufacturing in developing countries hadn’t begun to explode. (This is why we don’t want to impose stiff tariffs on goods made outside of the U.S.A. Our middle-class consumers would suffer. And of course other countries would impose stiff tariffs on those products we do export–which means we would sell fewer products and lose more jobs!
The solution: We need to create new jobs for our citizens. There are so many things that need to be done: we need many more people keeping our parks clean and beautiful (compare parks in the U.S. to parks in places like Germany); more teacher’s assistants in public schools so that one teacher is not alone in a classroom trying to teach 25 first-graders; we need more health care workers in community clinics; we need more people working to renovate and maintain our crumbling, often dirty and mice-ridden public schools; we need more people growing gardens on rooftops in inner cities– -I could go on. . .
The catch is that most of these jobs would be paid for by tax-payers–as they are in other countries that invest more in their environment, in keeping public spaces clean, in public schools and in health care clinics that offer preventive care.
Americans don’t like to pay taxes. Of course no one does–but Europeans pay much higher total taxes (including VAT, incomes, inheritance etc) than we do because they have figured out that it is worth it in order to live in a society where most people have good healthcare, public schools provide a good education in a safe, clean environment, parks are clean and beautifully planted, etc. etc.
We haven’t made that decision. We’re willing to spend money on our famlies, our homes, etc–but not public spaces or other people’s children.
Bottom line, the government could create jobs and these would not be “make-work” jobs. The workers would be doing things that need to be done. But taxpayers would have to pay for it.
Right now, tax rates for the wealthiest Americans are at historically low levels–even for the U.S.

Maggie – Though not an uber-policy wonk, I do work in health care strategy (hence the pen name – sorry) and I’ve read many of the key provisions (I’m confident I’ve read as much of it as many of the representatives who voted for it).
My point is that “how much Medicare can save” is much different than what is realistic to occur through the political process. For example, CBO and the official Medicare trustee report say that ACA extends the solvency of Medicare. But they are only scoring things exactly as written, not factoring even the items we KNOW for certain won’t happen (e.g. doc fix). Medicare Chief Actuary has produced much more realistic projections.
I agree with you on Berwick’s expertise. I work to create practical strategies that build on insights from the Dartmouth Atlas, IHI, etc. By the same token, I do have concern about giving government so much control – comparative effectiveness research can be a great tool, but it shouldn’t be used to the exclusion of practicing individualized medicine. So, both from principled concern like mine and from those using it to play politics, I fail to see how ACA will actually control Medicare spending.
Finally, this idea that Congress must accept IPAB recommendations or come up with something better (thus shielding Medicare from the lobbyists influence) seems rather naive to me. Congress can always just pass a new law repealing this constraint – it’s about the only thing likely to gain bi-partisan agreement.
Thanks for the dialogue.

ng–
I read the Brookings piece you sent me.
What the person writing the piece is suggesting is essentially a two-tiered system–one for low-income and lower-middle-income families, another for the rich.
He would charge higher co-pays if a woman chooses to have her baby at Mass General (which charges $1,000 for normal labor and delivery rather than at a hospital that charges significantly less for the identical service.
Why does Mass General charge more? Because it can. When it comes to low-risk deliveries, it’s not necessarily better, but it has a brand name which gives it market clout.
The Brookings writer suggests that women will automatically pick the less expensive hospital because the co-pay is lower.
Apparently he doesn’t know many pregnant women.
If you tell an expectant mother that one hospital is more expensive and she’ll have to pay $200 or $300 more in co-pays to deliver her child there, she will automatically assume that the more expensive hospital is better, and pay the co-pay—-As Long As She Has $200 to $300.
Many low-income women dont’ have $200-$300 lying around. So they’ll go to the cheaper hospital–feeling upset and resentful that they can’t go to the hospital where wealthier (which often translates into “white”) women have their babies.
Mother and baby probably won’t be any safer at Mass General. But Mothers will think they are safer there.
This is why “market solutions”–giving the consumer some “skin in the game” so that he can choose the less expensive option don’t work in healthcare.
When it comes to healthcare, most people don’t want a bargain. They want the best care. They assume more expensive means better. So they will choose the less expensive option only if they are poor. . .
This is not giving consumers a choice–this is forcing consumers to choose what they can afford–rationing by income.
Also, under the Brookings proposal people who can’t afford a higher premium won’t get the same services. In vitro fertilization, for example, won’t be included in their package.
This is a bad idea. Most states require that insurers cover IVF because if people have to pay for it on their own, they discover that the procedure is very expensive–about $12,000 each time you do it. When people are paying for it themselves, they will be likely to have 5 or 6 or 7 eggs implanted—to maximize the chances that they will get pregant and don’t have to pay for a second try.
Unfortuantely this also maximizes the chances that they will have quadruplets or quintuplets. This , in turn, increases the chance that one or more babies will be very small, sick, etc and will need intensive care, perhaps surgery–which Massachusetts insurance will wind up paying for.
When insurance covers in vitro it allows only 2 eggs implanted at a time, and lets you try 3 times.
This avoids the large mutliple births, and in the end saves money (not to mention suffering.)
Not covering chiropractors for less wealthy people is also cruel. My husband had severe back problems that were cured by a very good
chiropracter.
The AMA doesn’t like chiropracters because they don’t like anyone competing with doctors . . . (They would rather have doctors preforming back surgery on patietns like my husband even though back surgery is often totally ineffective.) They also don’t like physical therapists . .
Finally, the original proposal– capitation — was a good one. Capitation means that doctors are paid a lump sum per patient per year to keep that patient as well as possible.
If the patient stays well and needs relatively little care from the doctor, the doctor shares in the savings.
If the patient doesn’t receive the preventive care or chronic disease management that he should receive, and winds up in the hospital, his health care costs may exceed the lump sum, and the doctor won’t get a bonus.
If a doctor has a pool of patients who are sicker than most to begin with (or older, or poorer) the lump sum is adjusted with that in mind.
Basically, capitation gives doctors an incentive to try to keep patients as well as possible They’re paid more for better results rather than being paid more for doing more.
As for hospital charges–all hospitals should be paid the same amount for the same basic service (like labor and delivery). Hospitals that don’t meet the standards for safe labor and deliveries should be allowed to do them.
Some hospitals like Mass General should be doing the more elaborate procedures (like organ transplants) and paid well for them, but there is no reason for them to be paid more for delivering a baby.
In the past I’ve written about how, in Maryland, all hospitals are paid the same amount for every service (by insurers as well as Medicare and Medicaid) with adjustments for hostpials that serve more uninsured patients or that have teaching programs. (They have to be paid more per service to cover the cost of unpaid bills and extra cost of teaching.)
The system in Maryland works well. Brand-name hospitals are not allowed to gouge insurers.

Maggie,
Thanks for the write-back on this Brookings piece. I agee with a lot of what you wrote, but the major disappointing aspect concerning this article for me is summed up in the quoted lines below:
“August 10, 2010 —
To contain ever-rising health care costs, a commission established by the state recommended a year ago that Massachusetts replace the traditional payment model in which each doctor is paid for delivering each medical service, with the “capitation’’ approach in which a group of doctors is paid an annual fee for providing a patient with all healthcare. However, the Legislature recently put a hold on the commission’s proposal because it would be too complicated and contentious to implement.”
More specifically the last line of “However, the Legislature recently put a hold on the commission’s proposal because it would be too complicated and contentious to implement.”
How are we ever going to break through this almost religious fever in healthcare payment and utilization if society is too fearful to make needed changes?? If Mass won’t do the needed changes, who will??

Caspian & Ng
Caspian–
You actually do have to pay attention to the specifics of the legislation for your job! That’s good –makes it easier to have a good conversation,even if we disagree.
On Congress having to accept the advisory board’s recommendations for trimming fees for certain services (or come up with cuts that save an equal amount of money)– Yes, I suppose Congress could pass a law repealing that part of the legislation.
But it probably won’t because: a) Obama would veto the bill.
And b) Many in Congress realize that politicans shouldn’t be trying to make decisions about which medical services are most effective (and so should be done routinely, for everyone–for instance, Pap smears), and which services are not that effective ,but are done more often than they should be in part because they are so very lucrative (very expensive treatments for early-stage prostate cancer in older men who will probably die of something else long before they experience symptoms, especially if there is no hard evidence that the treatment reduces mortalities.)
Here, I’m not suggesting that Medicare will stop paying for treatments for early-stage prostate cancer, but I can imagine it might lower the fees it pays doctors for some of these treatments . . . )
As MedPac has noted, when a procedure is too lucrative, this encourages over-treatment. When Medicare cut payments for certain tests a couple of years ago, many people thought doctors would just do more of the tests, to make up for the cuts on volume. But instead, the volume of these tests began to level off. It was still increasing, but not by nearly as much.
This suggests that people who needed the tests were getting them, but lowering the fees had broken the curve of rising spending. . .
The advisory panel is made up of health care experts and doctors who are capable of looking at the comparative effectivness research, listening to the arguments, and making a judgment based on science.
On gov’t getting in the way of individualized medicine: We’re Not talking about Medicare telling doctors that they must follow comparative effectiveness guidelines–just that Medicare won’t pay as generously for certain services that seem to be overdone, exposing too many patients to risk without benefit.
But doctors will still be free to deviate from the gudelines (not “rules”) in individual cases–just as they are free to deviate from evidence-based guidelines at Mayo, the VA or Kaiser.
Conservatives who claim that comparative effectiveness reserach will lead to “cookbook medicine” are simplly spreadly misinformation That’s not how it works in other countries–in the UK, for example, NICE puts out guidelines, not rules for best practice. If memory serves doctors in the UK follow those guidelines 90% of the time.
Back to Congress– When Congress tries to make decisions about best medical practice, lobbyists intervene. Most Congressmen don’t know much about medical research, and they’ll vote with the lobbyists representing the folks making money on the treatment in question.
But today, many Congressmen don’t want to find themselves in the middle of this fight. They would prefer to pass the responsibility off to someone else.
They know Medicare has to cut waste. They don’t want to be blamed for the decisions.
They don’t want seniors to hold them responsbile if they trim the fees for tests that even the American Cancer Society say expose many patients to more risks than benefits. They don’t want the hopsital lobby to be mad at them.
On the other hand, they don’t want to be blamed for Medicare running out of money.
They would rather have someone else make these very sensitive decisions about what to cover and how much to pay for it.
They understand that Medicare has to cut back. No one wants Medicare to go broke on their watch.
. . .
Sure, some conservative Congressmen who hate “experts” of any kind(usually Congressmen who are not terribly well educated) want control over all of these decisions, but a great many don’t.
On the SGR formula that would cut all doctors’ feese by 22% across the board. . . This was always a dumb idea–a very crude solution. We don’t want to cut fees for primary care docs, geriatricians, general surgeons . . .
Congress will never implement the SGR cuts, but over ten years, Medicare will save more money by paring back increases in physcians’ fees for particular services, while also paying hospitals and nursing homes less for preventable errors, paying bonsues to doctors who keep patients out of hospitals (thus reducing hospital costs), steering patients to primary care (Medicare patients who have “medical homes” will probably be expected to go to their medical home before–or instead of– going directly to a specialist.) I’m quite sure they’ll also begin paying more for palliative care (which we now know saves money even when it causes patients to live longer), and shared-decision-making (when given full informaiton about risks and benefits, and a chance to share in the decision-making, 20% to 30% of patients decide against elective surgery. Not surprisingly, patients are less enthusiastic about surgery than surgeons are.
The goal is to cut the annual increase in Medicare spending that is now 6% or even 7% back to 2% to 3% annually–breaking the curve. If they do that each year over a period of 10 years, they will save far more we would save with a one-time 22% cut.
And we can do it; we did it for six years in the 1990s. (This is my next post.)
The big problem is not how much we are spending on Medicare now, but the continuing inflation in Medicare spending. The way to take the air out of the health care bubble (and it is a bubble) is to rein in the inflation.
If we could keep Medicare at 17% of GDP–with average annual growth in spending no greater than annual GDP growth–Medicare would become solvent. ( And the plan is to keep increases in Medicare spending down to 2% or perhaps 3% indefinitely, though what Berwick would call “continuous improvement”–more efficient care, which is, by definition, better care.
Sweden has kept health care spending as a % of GDP flat for years–even as their population ages (one of the oldest populations in Europe now). And health care experts in Europe consider care in Sweden to be among the best, if not the best, on the continent.
Particularly with Berwick at the helm, I believe this will happen.
Ultimately, Congress will accept him. He is extremely charismatic and very persuasive.
Those conservatives who hate reform because they hate Obama will never like him, of course, but they are so extreme that ultimately they will destroy themselves. (People like Mitch McConnell are not terribly charismatic. . . )
Also, Berwick inspires people. He will inspire the many physicians, nurses and even hospital executives who are frustrated by today’s broken system.
Berwick believes what he is saying, and that’s powerful.
Finally, because you know the field, you know that IHI’s reforms work. Yet few in our for-profit health care industry have adopted those reforms (I’m thinking of insurers, hospitals (these days, even non-profits are for-profit), etc.
The groups that have adopted Berwick’s ideas–and expanded on them–tend to be non-profit accountable care organizations Often they are both the insurer and the payer (Geisinger, etc.) This seems to be working very well, and I expect (hope) to see more of these organizations in the years to come.
Sorry to go on at such length–sometimes answering comments also helps me clarify my thoughts. Hope you don’t mind.
NG–
I’m not too surprised Mass wouldn’t step up to do the difficult thing.
On the one hand, it’s a very liberal state.
On the other hand, hospitals and the Massachusetts branch of the AMA (which is very, very wealthy) have great power in Mass. And the Mass. AMA is very conservative. (I once gave a speech at their annual conference about “shared decision-making.” Most of the audience seemed to think that it would be too much work to share decisions with patients.
Their power explains why health care in Boston is more expensive than in any other spot on the globe.
Just as CT. is dominated by the insurance industry, and NYC dominated by Wall Street, Medicine is the Big Player in Mass.
I think that Medicare (and Don Berwick) will step up to the plate to do the right thing. And Medicare/Medicaid has enormous clout. I can’t think of any hospital that could stay open without taking Medicare patients.
Some physicians could keep a practice going without Medicare, but they would have to be physicians who treat a cross-section of patients (eye doctors) not those who tend to treat older patients (on average, people aren’t diagnosed with cancer until they are 67.)
Also, younger patients tend to like younger doctors; older patients like older doctors.
This makes it hard for a doctor over 55 to keep a practice afloat without taking Medicare– unless he limits his practice to a very small group of extremely wealthy seniors who are happy to pay out of pocket rather than using Medicare.

Thanks Maggie. I’m trying to keep it as concise as possible, in respect for your time and your blog space.
“ politicians shouldn’t be trying to make decisions about which medical services are most effective…”
Of course, I agree. My exhibit A is the mammogram controversy. Experts recommend one thing, politicians override.
“As MedPac has noted, when a procedure is too lucrative, this encourages over-treatment.”
Yes, but if it’s not “lucrative” enough, under-treatment will result. How can we be assured that central planners – however smart and informed – can ever get it “just right.”
“We’re Not talking about Medicare telling doctors that they must follow comparative effectiveness guidelines…”
I think ACA proponents are trying to have this both ways. On one hand, they claim that it won’t keep anyone from getting care they want. On the other, they claim it will reduce costs. Best practice guidelines already exist in many areas and yet they aren’t followed. Either they are enforced/(perhaps we can even say “incentivized”) and they reduce costs (but limit individualized medicine), or they aren’t enforced/incented.
“When Congress tries to make decisions about best medical practice, lobbyists intervene. Most Congressmen don’t know much about medical research, and they’ll vote with the lobbyists representing the folks making money on the treatment in question.”
I couldn’t agree more. This is central to my point. Try to cut rates for anything and you’ll have some lobby flooding Capitol Hill in a D.C. minute.
“They don’t want seniors to hold them responsible they trim the fees for tests that even the American Cancer Society say expose many patients to more risks than benefits. They don’t want the hospital lobby to be mad at them.”
Exactly. And you think that outsourcing these decisions to “bureaucrats” will get Congress off the hook? I think not. They still have the power to fire the “bureaucrats” or change the law. I don’t think that the mammogram thing would have turned out differently just because of Dr. Berwick’s authority and power of persuasion.
“They understand that Medicare has to cut back. No one wants Medicare to go broke on their watch.”
Maybe, but the vast majority seem pretty willing to kick the can just a few years.
“Congress will never implement the SGR cuts, but over ten years, Medicare will save more money by paring back increases in physicians’ fees for particular services…”
Which services? Again, I say: a) Lobbyists and/or public outcry will beat those back. b) How do they know exactly which services and exactly how much to cut? Related, how do they work around the restrictions of Title III-E, sec. 3403(c)(2) to implement any meaningful changes? (sorry not sure how to get a link right there)
Again, I agree with you on the value of palliative care, shared decision-making, etc. I just doubt the ability of a *political* system to implement them and do so without a spillover effect of limiting care to those who want it.
“… IHI’s reforms work. Yet few in our for-profit health care industry have adopted those reforms”
I agree, but I believe that’s largely because the profit incentives aren’t aligned – as you know, insurers for the most part don’t care whether health costs are higher or lower – they make money providing administrative services and investment gains on the $ float. Employers and taxpayers ultimately pay the vast majority of costs.
“Sorry to go on at such length–sometimes answering comments also helps me clarify my thoughts. Hope you don’t mind.”
I know exactly what you mean; couldn’t agree more; again appreciate the dialogue. (Though it would help if you switched to a blog program that better facilitates quoting responses!).

Maggie,
To a for profit corporation, a dollar spent for health insurance and a dollar spent for wages receive the same tax treatment. Both are deductible as ordinary business expenses. For employees, health insurance premiums paid by the employer are not taxable income but wages, of course are. The end result is that there is an incentive to over consume health insurance and health care. I think most large employers and many small ones would not have a problem in converting what they currently spend for health insurance to higher wages if employees had a ready mechanism, like an exchange, to purchase health insurance on similar or better terms and/or tailor their insurance choice more closely to their perceived need subject to affordability constraints.
Separately, I agree with Robert Pozen and disagree with you regarding the desirability of tiered in network co-pays. If it were up to me, I would go considerably farther than Pozen suggested in his article. I think the differential needs to be sufficiently large to get the attention of middle class and upper middle class patients. Doctors, for their part, could help to explain to patients that high prices at many hospitals are a function of market power and not better quality or any other relevant factors. Unfortunately, most of the time doctors don’t know what services, tests and procedures cost and they have no incentive to care because they think they will be largely covered by insurance anyway as long as the provider is in the insurance network.
We have been using tiered co-pays in the drug space with considerable success for some time. Generics now account for almost 70% of all prescriptions written though only about 15%-20% of the dollars spent on drugs. Yet many patients, especially among the elderly, still think the brand name drug is better even though the generic is chemically equivalent. Just because they are mistaken about this perceived quality difference doesn’t mean they should be able to access the much more expensive brand for the same low co-pay as the generic. The same approach should apply to routine labor and delivery or colonoscopies at Massachusetts General and other high cost facilities.
Finally, I can offer a specific anecdote that illustrates this issue clearly. A friend in the Midwest needs to get a brain MRI twice a year. Her specialist is at an academic medical center. The hospital’s imaging center billed her insurance $2,915 for her most recent test and her insurance actually paid $2,625. She later learned that the local imaging center near where she lives less than 100 miles from the teaching hospital bills insurance $1,900 for the same test and accepts $660 as full payment from insurance. As it happens, I had the same test at an independent imaging center in lower Manhattan last December. Insurance was billed $1,800 but they accepted $475 as full payment — $95 from me (co-pay) and $380 from the insurance company. Hospitals are paid much higher facility fees than independent centers because their costs are far higher for everything from ER’s to uncompensated care to the fact that they operate around the clock. For images that are done on an outpatient basis and, by definition, scheduled well in advance, patients should have a clear incentive in the form of a significantly lower co-pay to use the independent imaging center instead of the high cost hospital owned facility assuming the independent center has reasonably up to date equipment and competent techs.

Barry Carol:
Two points I wish to make for consideration regarding your latest post.
1. Overconsuming healthcare just because you can is a symtom of an ill-informed public. If the dangers and inadequate standards of the current system were much more clearly known, no sane person would purposefully overconsume healthcare.
2. The adequacy of procedures that are provided according to standards of care must be all minimally acceptable, and that is the answer to this mindgame that paying more gets better care! Inadequate care should be a crime so that it does not exist. Then prices might be regionally different, but not different per region for the same defined process!

Maggie,
You are spot on about your cost control comments. What a refreshing concept: Using evidence based medicine to improve patient outcomes.
Did you see the article today (Joe Paduda blogged it) about the health plans increasing premiums while their costs drop to make even more money? We cannot look to any cost control leadership there.

Don,
The $475 that the imaging center accepted as full payment is the contract rate for that CPT-4 code that they and my insurer negotiated. The law requires all providers to bill all patients and their insurers at the same rate which is their artificially high list price. The rate they accept as full payment is the contract rate they negotiated or, in the case of Medicare and Medicaid, the dictated price that those two programs determine that they will pay. The difference is not bad debt. In the case of individuals without insurance, any difference in actual payment between the list price and what the provider collects is accounted for as bad debt but, since the list price is so absurdly high relative to the cost of providing the service, I don’t think it is appropriate to view it that way. If collections, whether from a patient without insurance or from Medicare or Medicaid, fall short of the actual fully allocated cost of providing the service, it would be reasonable, I think, to reflect unrecovered costs as a line item on their income statement.

Barry:
Are you saying that for the uninsured, they are actually billed the exorbitant list price.
Whatever balance is left, is considered bad debt?
What is the purpose of the exorbitant list price (MSRP)?
Don Levit

Two answers:
1.) Yes uninsured and self-insured people as well as anyone with an insurer who does not have a negotiated or imposed discount arrangement with the providers are billed the entire “list price” amount, often times several times the rate that is collected on an average basis. That is why, if you are uninsured, it is so important to go to the billing department of the institution and ask for a discount. I would start by asking for the Blue Cross/Blue Shield rate, or if you are very nervy, the Medicare rate. Discounts of up to 30-40% are offered routinely by many institutions.
2.) Why does this happen? It is a bit crazy, but it seems to stem from two things. The first is to have a very high list price to begin the process of negotiation from in dealing with third party payers. The second is that in many institutions, calculations of productivity of individuals and departments are based not on the collected amount but on the billed amount. This oddity exists because institutions do not want departments and individuals to be penalized due to taking on patients (especially Medicare and Medicaid, but also from other payers) who get big discounts, and therefore be encouraged to avoid or refuse those patients.
Many medical systems have budget patterns that are completely disrupted by this practice. When I worked for large organizations, the organizations calculated staffing and salaries based on billing totals which were then discounted for institution wide collection rates, rather than calculating totals based on collections. Needless to say this led to a big mess. In private practice, we did not pay the slightest attention to our billing totals, but rather watched our total collections.

Maggie:
Love your blog. Have assigned some of your writings as required reading for people that we’ve worked with.
Your reaction to my piece is completely understandable. Given the length constraints, I wasn’t able to make the point as clearly as I would have liked and the confusion is understandable.
But I was not talking about what should happen and certainly not what people on the left should do. As I you might infer from the fact that I work at New America with your former colleague Leif Haase, I personally support something more along the lines of Wyden-Bennett and am most excited about (and am working hardest on) the insurance exchanges that I think are really the linchpin of reform.
The case that I was making in the op-ed your reference is that people *on the right* should be very careful about undermining reform, specifically about going after the individual mandate first. My contention is that folks on the right shouldn’t assume that if we take another crack at this we’ll do something that relies more heavily on private insurance companies and that it is, in fact, decently likely that we’ll choose to do something more along the lines of Medicare. At the very least, eliminating only the mandate risks destroying the private market for individuals.
There are a number of reasons not to prefer a Medicare-type solution and you make that point here once again, with feeling. As I mentioned, I agree with you. However, there are very strong counterarguments. At the very least, it is not irrational to oppose this round of reform from the left.
The point that I made in the piece is that it’s pretty much irrational to oppose this round of reform (particularly the individual mandate) from the right because this is the most conservative thing that we were even remotely likely to do and this round of reform was designed, first and foremost, to preserve the private insurance market and the employer-sponsored healthcare that you accurately point out that many people still like.
(Although I’d be interested to see how that poll would turn out after a couple more years of 20% premium increases, higher co-pays, fewer services, etc. And I’ll be interested to see what folks reaction is to their employers’ contribution to their healthcare appearing on their W2.)
Best,
Micah Weinberg
Senior Research Fellow
New America Foundation

Micah, Caspian,
Micah–
Thank you very much for your generous reponse.
I can well imagine that space limits prevented you from offering other sides of the argument.
And I agree that if conservatives kill reform, that won’t lead to the happy ending that they might hope for. We’re not going to hand Medicare over to the private sector.
In my view, if they killed reform, nothing would happen with healthcare legislation. We would be left with a Congressional gridlock, and the status quo–which would only get worse, quite quickly. (Projections say that health care inflation will accelerate in the next decade.)
I agree that hoping for a Medicare-like solution (what I call Medicare E–for everyone) is not irrational, though as I say
in the post, at this point in time, I seems, to me,”irrespressibly optimistic.”
This was not meant as a put down. In these times, optimism is good. What we need to avoid is cynicism.
I hope you didn’t think I was taking aim at you, or your Op-ed. As a regular HealthBeat reader, you know that if I take aim, I take no prisoners. (And I don’t call them optimistic.)
I just found the op-ed provocative, realized that you were onto something in the something in the Zeitgeist (hat-tip), and so decided to comment on it.
Let me add, I have high regard for New America’s blogs on health care. I greatly admire Joanne Kenen’s work, and Lief is a friend.
Caspian: Thanks for responding.
I wrote: “As MedPac has noted, when a procedure is too lucrative, this encourages over-treatment.”
You replied: Yes, but if it’s not “lucrative” enough, under-treatment will result. How can we be assured that central planners – however smart and informed – can ever get it “just right.”
First, undertreatment is mainly a problem for the uninsured and people on Medicaid. This is largely because teh patients can’t pay the bill, or the payment is so low (Medicaid). But it’s also because many doctors don’t like dealing with poor patients who tend to be non-compliant and generally “difficult”–from the point of view of many physicians.
Underteratment is not a big problem when the pay for the service is low and the patient is upper-middle-class. Example: Mammograms. Tens of millions of upper-middle-class women get mammograms annually, yet the reimbursement is very low. This has caused some mammogram centers to close; a woman may have to wait 3 months for her appointment . . .But if you want a mammogram, you can get one. No problem.
As for getting the price “just right.” Of course, no one can. But a panel of medical experts using medical evidence is going to come much closer to fair pricing (paying more for treatments that are effective) than an insurance company (that pays more for services and products that are very popular–i.e. Vioxx, even though medical evidence showed it was killing people–because insurers wanted to keep market share. If they refused to cover Vioxx, they would lose customers.
On best practice guidelines–in fact, they won’t reduce “individualized medicine” because if doctors deviate from the guidelines for good reason (because this particular patient will benefit) then his Outcomes Will Be Better. Under the ACA, doctors will be paid more for better outcomes at a lower price–they won’t be paid more simply for slavishly following guidelines.
(They will be paid more for better outcomes either because their pay will be capitated-which means they share in savings when patients get the right care at the right time–or because they are on salary, plus bonsuses when the whole system achieves better outcomes at a lower price–i.e. delivering Value, nor Volume for our health care dollars.
You write: “Try to cut rates for anything and you’ll have some lobby flooding Capitol Hill in a D.C. minute.” Here you overlook the very impt. fact that, under ACA, Congress won’t be able to weigh in on cuts.
As for “bureaucrats” making decisions. Have you looked at who is on the advisory panel? Have you looked at who is on the oversight panel?
It’s much like MedPAC. Hardly bureaucrats. Health care experts with deep, comprehensive knowledge of medicine. (MedPAC is generally highly respected and viewed as non-partisan. I’m guessing you’ve read their reports. Glenn Hackbarth is hardly a “bureaucrat.” )
This whole notion that “bureaucrats” will be making decisions is part of the misinformation (a.k.a. lies) that conservatives have been spreading.
You ask where fees for services will be cut.
See MedPAC’s long and excellent reports for the past 3 or 4 years (twice a year). They very clearly point to where we are overpaying.
Medicare has already announced that this year, it is cutting fees for diagnostic tests done in a doctors’ office (we know that when docs have paid for or leased the equipment, and are makign the full profit on the test, they recommend twice as many tests. This is how they pay for the equipment)
Congress didn’t stop this cut.
(Also,The last time Medicare cut fees for tests, naysayres said doctors would just do more tests to make up the difference on volume–they were wrong)
Next year, Medicare has said that oncologists’ fees will be cut. (We know that cancer patients undergo way too much futile chemo during the last two weeks of life.)
After than, we’ll see cuts in fees to orthopedic surgeons. (Their average income suggests a bubble, as does the growing number of people having hip and knee replacements at a much younger age (55 or younger.)
Research shows that if you gave patients full information about risks and benefits and what’s involved in rehab, 20% to 30% would decide against joint replacement.
I suspect ortho surgeons will be paid to spend some time going through the shared-decison-making protocol (or to have someone on staff who is a shared-decision-making coach), while being paid less for these operations.
Medical reserach shows that at least half of all patients who undergo either angioplasty or by-pass surgery receive no lasting benefit. And we know which patients don’t benefit. Much good medical research published in peer-reviewed journals in this area. Another likely target.
Lobbyists will kick and scream. But Congress will not want to get involved in these very senstive decisions. And Obama would veto any effort to repeal this part of the legislation.
Health care spending in this coutry is heading for a wall. Many people in congress understand this.
And this is why Lobbyists are no longer going to be making the decisions about healthcare..
After nearly 30 years of excess, we’ve entered a more fiscally conservative era. Even consumers are saving rather than spending.
We use typepad for this blog (as do many other blogs.) I can well imagine that there are better programs, but I don’t make that decision (nor do I know enough about programs to make that decision.) If you have a suggestion, please e-mailBaronian@tcf.org.
John Baronian is very good and would be interested in your input. (I mean that sincerely)

Anne, Bruce Fryer, Don
Anne — Thank you!
Sometimes liberals on the left become frustrated with my economic analysis of health care. I share their values, but also think that liberals have to look at the numbers
Bruce Fryer-
Glad to hear from you.
Joe Paduda’s blog (Managed Care Matters) is one of my favorites. I’ll look at the post you recommend.
But even without reading it, I agree with you. For-profit insures are not going to lead the march to
higher quality and lower cost.
They’ve had more than 20 years to do this, and by and large, they haven’t.
Don–
Pat S. answers your questions in his comment-please see it, near the top of this thread.

Maggie – in reply to your response (10:20 PM) yesterday:
Re: reimbursement rates and over/undertreatment –
My point is that you can’t have it both ways. You can’t say that high prices causes overprescribing and not realize that reverse would also be true. Otherwise, we could fix everything by just lowering all the prices!
“They [best practice guidelines] won’t reduce “individualized medicine” because if doctors deviate from the guidelines for good reason (because this particular patient will benefit) then his Outcomes Will Be Better….They will be paid more for better outcomes.”
In that case, it’s the value-based payment creating the improvement, not the guidelines. Best practice guidelines exist in all kinds of areas already and yet they aren’t followed by X%. You would probably say that the problem is no incentive on providers for outcomes (I would agree although I’d add patient incentives as well), but what happens the first time some patient demands a procedure or test, doc says ‘no’ and it goes bad? Now it’s not just a malpractice suit (even if dismissed since they followed the guidelines) but a horror story to run on Fox News.
Re: rate cutting resulting in a flood of lobbyists. “Here you overlook the very impt. fact that, under ACA, Congress won’t be able to weigh in on cuts.”
I don’t overlook it all, I refute it. Congress will absolutely “weigh in” in on cuts – they are politicians trying to score political points! (Again, mammogram issue as an example). Congress can always pass a new law to undue the old one. Happens all the time (SGR for example). There is no way that if the American public pushes hard enough against some cut that Congress is just going to say ‘well, there’s nothing we can do.’
“It’s much like MedPAC. Hardly bureaucrats. Health care experts with deep, comprehensive knowledge of medicine….This whole notion that “bureaucrats” will be making decisions is part of the misinformation (a.k.a. lies) that conservatives have been spreading. “
I was specifically using the term “bureaucrats” (in quotes) signifying the way that it will be used by politicians, media, and the public to halt any major cuts, no matter how much all the medical experts and health economists agree. Also, I still have my question about what authority the new board will even have under 3403? Other than price adjustments (and that only to the extent that it doesn’t result in “rationing”)?
“Lobbyists will kick and scream. But Congress will not want to get involved in these very sensitive decisions. And Obama would veto any effort to repeal this part of the legislation.”
When was the last time that lobbyists “kicked and screamed” and were ignored? (And don’t tell me PPACA – AMA, insurers, and Rx companies all made out in the deal on net. Unions and AARP endorsed it. Most business groups were basically neutral).
Okay, Obama can veto it – that is your best argument, but he’s elected too and there will be Presidents elected after him.
“Health care spending in this country is heading for a wall. Many people in congress understand this.
And this is why Lobbyists are no longer going to be making the decisions about healthcare..”
Couldn’t agree more about the wall. Couldn’t DISAGREE more about lobbyists no longer making the decisions.

Caspian,
Caspian,
Thanks for your reply.
In fact, when Medicare lowered prices for many tests a couple of years ago, volume leveled off .
(This is well-documented.
At a certain point, if a procedure just isn’t that lucrative, it becomes less popular.)
Lowering prices does help.
It’s just hard to get Congress to agree–lobbyists intervene.
But under the ACA Congress won’t be able to block lowering prices unless it can quickly come up with equal savings that won’t reduce the quality of care. This is the law.
Could the law be changed?
It will be difficult. At this point, the majority of Americans do not trust Congress. (See polls.)
Anyone who argues that some Congressmen want to weigh in on these decisions so that they hike their campaign contributions will have a compelling argument.
Moving on to your next comment: You are entirely right that best practice guidelines are not followed in many areas.
This is one major reason why average outcomes in the U.S. are not as good as in countries where guidelines are followed. (Different medical culture, differeent medical education. In many other countries, med students are taught to practice evidence-based medicine, and very large “I’ll do it my way” egos are discouraged.)
There are also pockets of excellence in the U.S. where docs are expected to follow evidence-based guidelines most (not all) of the time, and where large egos are discouraged.
The Mayo Clinic stands out in this regard. After the first few years, all docs in a particular specialty are paid the same salary (no bonuses). And all docs have the same size office.
Outcomes are significantly better than at many medical centers. (This is also true of many other accountable care organizations where docs are expected to follow guidelines most of the time.)
In other words,guidelines lead to better outcomes which, in turn, leads to
higher payment for better outcomes.
Docs really don’t worry about showing up on FOX news (a very, very rare event.) They worry about being sued.
Under reform, as docs pay more attention to guidelines, this will shield them from malpractice suits.
Very likely, we’ll see new legislation in this area in the next few years.
As for lobbyists:
We’ve entered a new era.
The 1980s, 1990s and the first part of this century were eras of excesss–over-spending on over-priced items led to mounting debt.
Now, the average American has figured out that Shop Until You Drop is not a great strategy.
Consumers are spending far less–and saving more.
If the average American is recognizing a change in the Zeitgeist, I have to assume that many of our legislators are sharing this insight (if only becuase voters are making it clear to them that healthcare has become unaffordable. Even Medicare is beoming too costly for many seniors–co-pays and deductibles are too high.)
Many people were surprised that the Affordable Care Act passed Congress. In a sense, it was surprising– this Congress is generally moderate/conservative. There are very, very few truly liberal legislators left in D.C.. (When I refer to “truly liberal” I’m thinking of people like Ted Kennedy.)
Yet, this group passed the ACA? Why?
Even moderate Democrats realized that we have to do something to stem healthcare inflation.
If they have to choose between lobbyists who want them to block spending cuts, and voters who are going to vote them out of office if they don’t bring the cost of healthcare down. . .they will choose the voters.
All of the contributions from all of the lobbyists in the world will not save you if voters have decided that you are not acting in their interest.

Barry–
Good to hear from you, even if we don’t always agree.
(After reading responses to my posts on other blogs, I am very grateful that the vast majority of my readers on HealthBeat are actually interested in the issues.
You write: “Doctors, for their part, could help to explain to patients that high prices at many hospitals are a function of market power and not better quality or any other relevant factors.”
Barry– Many doctors who have privileges at brand-name hospitals are fans of those hospitals. Because they admit patients to those hospitals (and have good connections there) they attract relatively wealthy, well-insured patients.
They are not going to say anything to their patients that would undermine the reputation of a hospital that provides good care –and charges more than other hospitals because it has a marquee name.
Many doctors don’t care if insurers or taxpayers are over-paying these hospitals. Many doctors just don’t feel that reining in health care spending is part of their job.
As for “independent imaging centers”– many don’t have “reasonably up to date equipment or competent techs.” I agree that many academic medical centers over-charge for imaging. (They also waste money in a great many areas that provide no medical benefit for patients.) But unfortunately, independent, for-profit imaging centers vary widely; many don’t do good work.
As for “reasonably good equipment”– Imagine that your 27-year-old child earns $27,000 a year in a job where he does useful work that he enjoys .His insurance only covers imaging centers with “reasonably good equipment”His doctor is concerned that his symptoms suggest cancer.
Would reasonably good equipment be good enough? Not for my child, your child, or anyone’s child.
Tiered healthcare is fine when we’re talking about health care that steers patients away from brand name drugs to generics that are just as good..
But tiered health care is not okay when it divides the population into one group that receives healthcare that strives to be “very good” and another group that gets “reasonably good” care.
My guess is that, on this point, you agree.

I thought we had this conversation about tiered health care. It will always exist as there will always be people with a lot of money to buy it with cash. I don’t see a problem with that. Why can’t you accept that the poor will always be among us and that life isn’t fair? Why can’t you accept that those that have will get better?

This will probably be my last comment for a couple of weeks as I’ll be traveling and won’t have access to a computer.
I think doctors, along with patients, need to start to learn to care about costs even when insurers or taxpayers are paying all or most of the bill. If you ask a referring doctor how much a service, test or procedure will cost, either at list price or contract rate, he generally doesn’t know and, under the current system, he has no incentive to care. That’s part of the problem. Doctors are quick to whine when they think they’re not being paid enough but when you ask them to help control costs by helping to steer patients to the most cost-effective providers, they claim that it’s not their job. Well, it should be part of their job. As a patient, I would also expect them to know if a local independent imaging center has decent equipment and qualified, well trained techs. Reputations of imaging centers should be well known to referring doctors.
Regarding the state of the art equipment that might be able to detect a suspected cancer in a young person, you seem to want to have it both ways. On other occasions, you criticize GE and others for aggressively selling imaging equipment that may be little better than what already exists, charging a lot of money, and helping to foster a medical arms race among hospitals. Other times, you say the most modern equipment can detect minor breast lesions that will probably never cause harm and often disappear but the detection results in aggressive treatment. In Japan, they have a lot of less sophisticated imaging equipment that costs one tenth the price of our state of the art machines but the Japanese think they’re good enough. Their population doesn’t seem to have suffered in terms of life expectancy.
Finally, you and many others have frequently noted that 75% of healthcare costs relates to the management of chronic disease. Patients don’t need to go to Massachusetts General and their high priced doctors for routine management of diabetes, hypertension, asthma and heart disease. They don’t need to go there for mammograms and colonoscopies. The vast majority of general surgeons can competently remove a gall bladder. Besides, a lot of high priced facilities are not famous but are dominant players in relatively isolated geographic areas. A willingness to travel even 50 to 100 miles for a sophisticated test could easily save 50%-75% of the cost.
With tiered in network insurance plans, combined with good price and quality transparency tools available to both patients and referring doctors, I guarantee you that healthcare costs would decline. Add in capitation for primary care and bundled payments for surgical episodes and you will find that doctors are suddenly interested in what healthcare costs outside of their own practice. Yes, wealthier people would still be able to access the high cost facilities if they’re willing to pay the (hopefully significant) extra co-pay while poorer patients won’t be able to afford to. Well, how good is the care that they’re getting under Medicaid now if they can find a doctor who will see them? Nobody ever said that life is completely fair.

Barry & Doug–
Barry–
You write: “Regarding the state of the art equipment that might be able to detect a suspected cancer in a young person, you seem to want to have it both ways. On other occasions, you criticize GE and others for aggressively selling imaging equipment that may be little better than what already exists, charging a lot of money, and helping to foster a medical arms race among hospitals. Other times, you say the most modern equipment can detect minor breast lesions that will probably never cause harm and often disappear but the detection results in aggressive treatment. ”
I’m puzzled. There is no contradiction here. In each case, I am saying that the advanced imaging euipment that detects the minor lesions that will disappear is doing more harm than good.
Barry & Doug:
On the idea that “life isn’t fair.”
This is true.
Some of us will live in nicer houses, drive better cars, eat in restaurants where the food is better.
But heatlhcare isn’t a luxury. It’s a necessity–like water, light and heat.
The children of the poor should get exactly the same quality of care that wealthy children receive.
This country was founded on the notion that we should all share equally in the opportunity to pursue “life, liberty and the pursuit of happiness.”
Without your health, you can’t do that.
Virtually every other developed country in the world recognizes the need for equal healthcare for all.
Do you really think that they are all wrong, and we are right?
Ultimately, the very best medical centers should treat the most difficult cases, regardless of the family’s ability to pay.
This is what Mayo does.
If there is no hopsital in your region that is equipped to deal with your disease, they will take you. (And then figure out how much they will bill you for care–based, to a large degree, on what you can afford. But you get the same care–whether you are paying less or more.
Doctors at Mayo have no idea which of their patients are on Medicaid, getting charity care from Mayo, or paying full freight for their care through private insurance.()
Docs at Mayo are paid the same salary whether they are treating patients who can’t afford to pay, or patients with gilded insurance.
Alan P. –Thank for the link ot the piece about Mayo. I will read.
What employers guess bout whether or not their plans will be grandfathered is just a guess.
The rules aren’t complete, and employers don’t know how they will apply them.
Reformers would like to see large companies stay in the benefits business–on average, they provide good, comprehensive benefits while paying an average of 85% of the cost.
This means that taxpyers don’t have to worry about these employers’ middle-income and low-income employees.

Wow Maggie,
Last time I checked food, water, light, and heat cost money. Sometimes I don’t have electric and I don’t ask anyone else to pay that bill. Why should someone else pay my healthcare? I made my choices in life and I live with them.

Maggie – I’m telling myself that deep down, I’ve swayed you a bit on a few points. Maybe – just a little bit? On the issue of overtreatment/undertreatment?
On the issue of whether politicians will overturn rate cuts (or other reductions in the form of tighter treatment criteria, etc.) – we’re probably going to agree to disagree. I guess we’ll know in 5 years. Here are my final thoughts on that topic:
“Docs really don’t worry about showing up on FOX news…”
Not the docs that worry; the politicians will care when people think that the plan they are supporting (or at least refuse to amend/repeal) is denying care.
“As for lobbyists: We’ve entered a new era.”
A new era of austerity? I don’t see it. About the only thing that D’s & Rs agree is that more stimulus is needed to help spur the economy (they just disagree about whether it should be more spending or more tax cuts – very few are actually talking seriously about deficit reduction and many of those won’t act when push comes to shove).
“If they have to choose between lobbyists who want them to block spending cuts, and voters who are going to vote them out of office if they don’t bring the cost of healthcare down. . .they will choose the voters.”
Sure, but the point is that won’t be the choice. It’s voting what’s in the best long-term interest of the country vs. the lobbyists. The people will split between the two camps, with a healthy junk siding w/lobbies. Remember these are infallible doctors talking. A couple of examples of people not getting treatment will be plastered across the news and lots of Americans will have all the proof they need of government rationing.

Caspian–
You assume that the public –and public interest groups–will
reject anything that looks like rationing.
Yet consider what has been happening re the FDA’s panel’s recommendation that Avistan not be used for breast cancer.
Not only the National Cancer Institute, but the Breast Cancer Coalition (a major patient advocacy group) and Cancer Action,
(another very impt. advocacy group), the Cancer Prevention and Treatment Fund of the National Research Center for Women & Families, Our Bodies OurSelves, and many other patient groups have come out strongly supporting the FDA panel.
Only the “Susan G. Komen for the Cure” advocacy group is protesting the decision, and they have long been identified as a conservative group (the founder and her husband helped deliver Texas to Bush) and critized for the fact that the Komen foundation owns pharmaceutical and petroleum stocks, refuses to talk aobut environmental causes of cancer, puts too much emphasis on early detection and mammograms (while the other groups agree that for some women, mammograms cause more harm than good.)
They’re also heavily involved in the “pink” movement– corporations making money by getting involved in breast cancer. When Koman promoted Kentucky Fried Chicken’s “pink buckets” of fried chicken” breast cancer advocates were appalled. (KFC’s chicken is considered a carcinogen.)
Sure, you see an uproar about Avaistan as an example of Obamacare “rationing” care on conservative blogs–and on the WSJ’s editorial page.
But the mainstream press– USA Today, the Washington Post, etc., have all been reporting the many reasons why Avistan shouldn’t be prescribed for breast cancer patients, quoting the National Cancer Institute, etc.
This shows real progress.
People are beginning to understand the difference between “rationing” and makng care more “rational.”
They are beginning to grasp the concept of evidence-based medicine.
The FDA didn’t make this deicion based on cost– they made the decision based on the fact that the drug does not extend life, and does lead to horrible side effects for many women.
As for Congress–many politicians do understand that we need to reduce the deficit. Democrats believe that we must end the Bush tax cuts for the rich–which played an important part in creating the deficit. I’m pretty sure that will happen.
Health care reformers believe that we must rein in Medicare spending, which is why the legislation gives an Independent Payment Advisory Board the power to recommend cuts to Medicare (that won’t reduce benefits, raise co-pays or effect quality) whenever Medicare spending goes over prescribed annual limits. (the limit changes over time, but ulimately is GDP growth plus 1%).
Congress cannot veto IPAB’s recommendatoin unless it comes up with a recommendation for reducing Medicare spending that saves an equal amount of money.
I doubt Congress will want to go there– legislators won’t want to be blamed for any cuts to Medicare (even cutting waste.)
If Congress does nothing, within a fairly short period of time, IPAB’s recommednation becomes law. Even if legislators try to veto, they need a super-majority.
Keep in mind, Congress voted for this legislatoin.
In other words, legislators implicitly admitted that they (and lobbyists) represent the biggest obstacle to healh care spending. Like Odysseus, they agreed to lash themselves to the mast, so that they can’t follow the siren call of lobbyists.
AT this point in time, I think a great many legislators realize that Medicare will go broke if something isn’t done, and they don’t want be blamed for that something. They would rather hand the responsibility off to someone else, and tell lobbyists– and any seniors who fear they will lose something: “there was nothing we could do.”
(Here I’m talking about liberals and moderates, not conservatives. But conservative Republicans are quickly becoming a minority party. Republcians will definitely pick up seats this fall, but I doubt that the number of conservatives will grow significantly. Americans are turned off by the extreme rhetoric & ideology.
As for whether we’ve entered a different era–look at consumer spending and savings. Middle-class and upper-middle-class Americans are behaving differently.
Look at the stock market, unemployement, etc. This economy will not create jobs. The govt’ will have to create jobs and (wealthy) taxpayers will have to fund that job creation.
We’re heading into a double dip recession, and the second dip will be worse.
The country will be ready for a political pendulum swing, to the left.
This isn’t to say that any of this will be easy. It will be bloody, and the road to reform will be rocky.
I look foward to continuing our conversation as we head down that road.
Thanks again for your lucid and provocative comments.